Friday's session saw another very narrow range in the trading of the major indices.The Russell 2000 (^RUT) moved slightly ahead with a 0.2% gain for the session which was also the percentage gain for the Nasdaq Composite (^IXIC). In reviewing the chart for the small cap index the most constructive feature from a bullish perspective is the manner in which the index's recovery saw it move decisively through the congestion zone between 770 and 800 that we have drawn on the chart.

Volume on the exchange traded proxy for the Russell 2000, IWM, has slowed noticeably over the last two sessions with Friday's activity only forty percent of the average daily volume. The action amongst the financial stocks has been constructive and the broker/dealer index managed a close above 240 that we discussed last week. Among the factors that we will be watching this week are the oil services sector and energy prices as well as the forex market. The euro seems to be stalling at the critical $1.33 level and the lack of a directional bias is another reflection of the mixed data from the US economy.



The yield on the ten year Treasury note has been moving up steadily since the middle of last week after the FOMC announcement. A possible implication is that bond traders are a little more concerned about inflation than the Fed governors appear to have been in their last statement.

The yield now sits at 4.6% which is an area of chart support and resistance and which also coincides closely with the 50-day EMA.



The Nikkei 225 (^N225) seems to be taking its cues from Wall Street as the narrowness of range of the last two sessions including Monday’s trading echoes the pattern in the US equity indices. The recovery since the late February sell off is also taking a breather just below the 62% retracement level.



TRADE OPPORTUNITIES/SETUPS FOR MONDAY MARCH 26, 2007

The patterns identified below should be considered as indicative of eventual price direction in forthcoming trading sessions. None of these setups should be seen as specifically opportune for the current trading session.

In our commentary on Friday we cited the following for Jabil Circuit (JBL) - A bearish descending wedge formation and the move down below all three moving averages on heavy volume suggests that the stock is headed back towards the recent lows below $24. Unfortunately the gap down on the open Friday would have removed most of the profit from the precipitous drop.



QLogic (QLGC) is in a very constricted range from which a breakout is to be expected soon. There is evidence of accumulation.



Silicon Lab (SLAB) has the converse pattern to JBL and we would expect a move up towards the $32 level in coming sessions.



Terra Industries (TRA) has negative divergences on both the MACD and MFI charts.



Penn National Gaming (PENN) has been in an ascending channel just below the 50-day EMA and seems to be unable to overcome resistance at $44.



Weightwatchers (WTW) has a similar pattern to QLGC and the basing pattern appears to have created a bullish setup.



Clive Corcoran is the publisher of TradeWithForm.com, which provides daily analysis and commentary on the US stock market. He specializes in market neutral investing and and is currently working on a book about the benefits of trading with long/short strategies, which is scheduled for publication later this year.

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